In 1909, the Russian prime minister Pëtr Stolypin told a foreign journalist: “Give the State twenty years of internal and external peace and you will not recognize Russia.” At that time there were real hopes in Russia’s huge potential. With its natural wealth and vigorous new industries, Russia promised to become the dominant economic power on the European continent. Western capital was heavily invested in Russian industries. The creative forces of a burgeoning democracy were breaking free from the old authoritarian social order, giving life to an exciting new society. But twenty years of peace were a lot to ask. Two years later, in 1911, Stolypin was assassinated—and with him went the chances of political reform before the catastrophe of 1917.
The new capitalist Russia that emerged from the rubble of the Soviet Union in 1991 found itself in a similar position to the capitalist Russia of 1909. In natural resources, Russia is the richest country in the world, with one third of its natural gas, one fifth of its precious metals, and perhaps a quarter of its oil. Given twenty years, it could become a dominant economic power in Eurasia, provided its enormous wealth is not squandered or, worse, plundered by a small handful of businessmen and their partners in the West. Once again, foreign investments are pouring in. Capitalism is transforming major cities, particularly Moscow and St. Petersburg, which today are bright, exciting places barely recognizable from Soviet days. But whether it improves the lives of ordinary Russians will depend on the consolidation of a democratic nation-state.
According to Robert Service, professor of Russian history at St. Antony’s College, Oxford, such consolidation was the grand project of 1991. In his scholarly and well-informed survey of the first post-Soviet decade, Russia: Experiment with a People, Service maintains that Boris Yeltsin came to power with a “national” program of reform, which
encompassed not only liberal democracy and the market economy but also ideological pluralism, local self-government, a legal order, ethnic tolerance, individual freedom and civic nationhood. The rulers in the Kremlin… sought out support in various organisations and social groups and organised propaganda for the project. They contrived a set of state symbols to break with the communist past. This substantial enterprise was tantamount to a project of nation-building even though the rulers did not refer to it as such.
Service explains how this visionary project came to be abandoned during the Yeltsin years, between 1991 and 1999. New elites emerged from the old Communist nomenklatura and the mafia-ridden world of post-Soviet capitalism and seized possession of precious national assets, including the country’s gas and oil, as well as its banks, press, radio, and television, and even threatened the primacy of the state itself. Service has no illusions about the benevolent hand of capitalism. “Democratisation and marketisation have spectacularly failed the Russians,” he concludes.
Andrew Meier, a Moscow correspondent for Time between 1996 and 2001, is similarly pessimistic in his lively and perceptive Black Earth: A Journey Through Russia After the Fall. Meier sets out on a search for hope and meaning in the bleak political landscape of the Yeltsin era. He ventures south to the battle zone of Chechnya, north to the Arctic mining city of Norilsk, a former Gulag settlement, and east to the island of Sakhalin, a penal colony when Chekhov traveled there in 1890, but now an oil-rich enclave controlled by foreign oil companies. On his travels he finds little hope or meaning. Even among the upwardly mobile sections of Moscow’s middle class, Meier meets despondency when he returns to the capital to meet some friends, a lawyer named Andrei and his artist wife, Lera, with whom he had lived before the Soviet fall:
Real estate, vacations, boarding schools: These were the talk of the Moscow business class. Only Chechens now talked desperately of leaving. For Andrei, however, it was all he could think of. Things had gotten better, of course, he said, pouring another glass of wine. Life was fine, “in the details.” You could go to a restaurant, drink Bordeaux, and eat foie gras. You could work hard, or steal well, and buy your own apartment and travel the world. It was just in general that life remained as impossible as ever. “No matter how far you get here,” Andrei said, “you still face a deadend.”
One often hears such views from people like Andrei—it seems that pessimism is the permanent condition of the intelligentsia in Russia—even when they are dining in first-class restaurants and can talk in ways that would not have been conceivable just twenty years ago. Because Western commentators tend to move in these circles, we get, I think, an over-gloomy view of Russian life today. There are in fact optimistic signs—not least a new sense of personal liberty and opportunity that has energized a growing middle class in the big cities. Yet there are also grounds for serious concern.
One is the state of Russian politics. After all the hopes of Russia’s “democratic dawn,” the Yeltsin years must be regarded as a failure, undermining trust in the government and even perhaps belief in democracy. Service places politics at the heart of his analysis, but his view of politics is very broad. He looks at state symbols and propaganda, public opinion and popular culture, mass organizations and political parties. This enables him to place the failure of Yeltsin’s reforms in a convincing social and historical setting (something that, alas, cannot be said of most political science).
Service rightly emphasizes the political legacies of the Soviet system: they can be seen both in the authoritarian post-Soviet politics and in the clientelism by which business cronies of high politicians received lucrative rewards. The Soviet legacy may also help to explain some popular attitudes. According to a poll taken in 1994 (admittedly, a particularly low point for the economy and the war in Chechnya), 43 percent of the Russians thought that a “strong leader” was what the country needed to get out of its predicament. In the early 1990s Yeltsin seemed to fill the bill. He was the hero of the barricades during the military plot against Gorbachev in August 1991. His broad, expansive, slightly reckless (“Russian”) qualities gave him genuinely popular appeal, even if his bouts of heavy drinking sometimes caused embarrassment. But, as Service argues, Yeltsin soon began to lose support. He acted in violation of the constitution—dispersing by force the Supreme Soviet in October 1993 and rigging ballots in the elections of the following December to ratify the newly imposed Constitution of the Russian Federation. As a result, Service writes, he “undermined the chances to build a popular sense of legitimacy for the new Russia.”
More alarming still were the mounting allegations of corruption against the President and his family. There were questions about Yeltsin’s daughter, Tatyana Dyachenko, who lived the life of a multimillionaire, even though she had no obvious job. The financier and media magnate Boris Berezovsky, who had close links with Dyachenko, was said to have paid large sums of money into Yeltsin’s bank account—“royalties” for the second volume of the President’s memoirs. Then, in August 1999, Yeltsin and his daughter were linked to the scandal involving a Swiss-based construction company called Mabetex—a case of money-laundering and bribery on a vast scale. It had, Meier writes, already ensnared Pavel Borodin, Yeltsin’s drinking partner and the chief of the powerful Kremlin Property Department, who was alleged to have taken bribes from a Kosovar Albanianbanian for contracts to refurbish the Kremlin.
The disturbing thing about this mounting evidence was not just what it said about the President; it was also what it said about the nature of the new political system. Powerful and corrupt business magnates and senior politicians were working together to secure their mutual interests. Huge cash funds and support from TV and the press were provided for Yeltsin’s government in exchange for tax exemptions and the sale of state assets at knockdown prices to favored businessmen. For example, Viktor Chernomyrdin used his position in the old Soviet gas authority to set up a private company, Gazprom, the largest gas supplier in the world, to which he then gave tax exemptions when he moved on to become the prime minister in Yeltsin’s government, during the years between 1992 and 1998.
The rise of the “oligarchs”—business tycoons with vast conglomerates in banking, gas and oil, precious metals, and the media—represented the most serious threat to Russia’s fledgling democracy. There was a real danger that the entire state sphere would become corrupted and criminalized, as a small handful of magnates (and the mafia gangs who protected their interests) moved into the sphere of government. By the end of Yeltsin’s reign the magnates gave the impression that they were dictating policy.
It all began with the 1992 privatization program hurried through by Yeltsin’s young reformers Yegor Gaidar and Anatoly Chubais, visionary believers in the panacea of the free market, in consultation with the American economists David Lipton and Jeffrey Sachs. They devised the scheme through which the old Soviet industries were parceled out to Russian citizens in the form of vouchers that could be converted into company shares. Most of them were bought up by businessmen and foreign traders, whose agents on the streets were able to buy many people’s vouchers for about the price of a bottle of vodka. The savings of ordinary Russians had been wiped out by the hyperinflation that followed directly from the government’s decision, in January 1992, to release controls on most prices (“shock therapy”). Many people were desperate.
But the worst scandal was the scheme of “loans for shares” introduced in 1995. Yeltsin’s government was strapped for funds to pay its public workers, many of whom had not received their salaries for months. Facing reelection in 1996, it was in danger of losing power to a resurgent Communist Party unless Yeltsin could find some ready cash. In deepest secrecy Chubais brought together the leading oligarchs (Mikhail Khodorkovsky, Boris Berezovsky, Vladimir Gusinsky, Vladimir Potanin, and Roman Abramovich among others) and offered them a deal allowing them to pay—through “loans”—for temporary ownership of the controlling shares in major oil and mining companies belonging to the state. The shares were sold through rigged auctions which the businessmen controlled themselves. Khodorkovsky bought 45 percent of the shares in Yukos, one of Russia’s biggest oil giants, at the bargain price of $159 million, just $9 million more than the opening price. Potanin purchased the controlling stake, 38 percent, in the Norilsk mining complex at just $100,000 over the opening price of $170 million. These acquisitions became permanent when the government predictably proved unable to repay the loans on time.
Through this controversial scheme Yeltsin raised an estimated $500 million for his electoral campaign in 1996. It was enough to overwhelm the press and television with anti-Communist propaganda and to make possible a sweeping victory. But the real balance of political power now lay with the oligarchs. And even though their fortunes fell when the ruble crashed in 1998, they never lost as much as the Western banks which had invested heavily in them.